Ac505 Case Study 2 Essay

The percentage Breakeven Sales Change can be calculated simply by dividing the unit sales change by the initial sales level, or may be calculated more directly with the following expression:

In order to calculate the breakeven point, we use the following equation and budget data:

Although the financial goal is to create profit, we need to calculate the breakeven point to get started.

Unit CM= $160 average full passenger fare – $70 average variable cost per passenger =$ 90

The variable cost per unit is $25 and the revenue per unit is projected to be $45.  Find the break-even point.Answer

23) Hug Me Company produces dolls. Each doll sells for $20.00. Variable costs per unit total $14.00, of which $6.25 is for direct materials and $5.25 is for direct labor. If total fixed costs are $435,000, then the break even volume in dollars is _____.


 A production run of toothpaste requires a fixed cost of $100,000. The variable cost per unit is $3.00. If 50,000 units of toothpaste will be sold during the next month, what sale price must be chosen in order to break even at the end of the month? Note: please report the result as a whole number, rounding if necessary and omitting the decimal point.
 


Answer

reach 47,476 units which will result in $166,166 in dollars during the third quarter of our first

If fixed costs increase, but variable cost and price remain the same, the break even point

Some management prefers to view the break even points via a percentage, in which case we would need to derive the contribution margin as a ratio. This would be the unit contribution margin/ unit sales price.

The financial breakeven point considers how many units it would take in the first year to bring the company’s NVP to zero. To do this, fixed cost (rent included) must be added to the operating cash flow and then divided by the contribution margin. In this case, 30,000 units would need to be sold.

1. Assume that a company is budgeting to sell 2,500 units of a product at a selling price per unit of $32. The variable cost per unit is $26 and total fixed costs are $5,000.

This method uses simple algebra, and usually focuses on finding the quantity of units that must be manufactured and/or sold, although you may need to find the proper sale price, or less often one of the other variables given instead. The other method for calculating the break-even point is the contribution margin method, which is the same as used by loscostos.info: [Fixed Costs/ (Sales – Variable Costs)] = Break-Even point in units sold. This method will give you how many units to be manufactured to reach zero profit, but can easily be retooled to give the break-even point in revenue. Instead of dividing by the contribution margin, you divide by the contribution margin ratio, which is found by dividing the contribution margin by the sales revenue, which looks like this: (Sales – Variable Costs) / Sales = Contribution Margin Ratio. Calculating the Break-Even point with this method results in this formula: [Fixed Costs / ((Sales – Variable Costs) / Sales)] = Break-Even point in dollars. Finding the Break-Even point in either respect is useful because it tells a company the bottom line in how much product they must sell or how much they must sell their product for in order to cover their expenses. Finding a Target Profit with these equations is as easy as adding your target to the end of the equation or in the

(1) A break even analysis is a result of variable costs deducted from the organizations revenue. The result is the contribution margin. Then the fixed costs are deducted to equal a number. The break even point would be when the costs are the same as the break even amount.

This equation is solved for the sales volume in units. c. In the graphical approach, sales revenue and total expenses are graphed. The break-even point occurs at the intersection of the total revenue and total expense lines. 8-2 The term unit contribution margin refers to the contribution that